George Gleason is becoming a Texan, in a transient sort of way. The Bank OZK chairman and CEO is setting up a residence in Dallas, home to the $26 billion-asset lender’s largest business unit: the real estate specialties group.
The RESG loan portfolio totaled $11.3 billion as of Sept. 30.
Powered by multimillion-dollar commercial construction loans in some of the nation’s largest markets, the group accounted for more than half of Bank OZK’s recent loan total of $19.3 billion.
Gleason ramped up his already significant work interaction with RESG in mid-2017, a move that coincided with the departure of Dan Thomas, vice chairman, chief lending officer and president of the group.
Regarding Gleason’s increased presence in Dallas, Bank OZK issued this statement: “RESG has always been a focus for George, and he has spent a great deal of his time there over the years. In 2021, he expects to spend the majority of his time in Dallas working with Brannon Hamblen, who leads RESG, and Brannon’s exceptional team, which has made RESG a leader in commercial real estate lending throughout the United States.
“George will be in Little Rock often, spending time with family here and working at our new headquarters. George’s duties will not change, the bank’s headquarters will remain in Little Rock, and no departments or operations will relocate. George will retain his home in Little Rock and continue to be involved in civic activities here.”
Among the personal considerations for the Big D move are twin granddaughters living in Dallas.
Formed in 2003, RESG is headquartered in the Preston Hollow area of Dallas at 8300 Douglas Ave. In addition to the 80 staffers in Dallas, the group has 20 scattered around offices that opened in Atlanta (2012), New York (2013), Los Angeles (2014) and San Francisco (2016).
“Through good times and bad, we’ve been making loans because we’re built to withstand the cycles of the real estate market,” said Hamblen, RESG president and chief operating officer. “What made that possible is a bank extremely disciplined in how it did business, especially as it relates to commercial lending.
“COVID gives us another platform to display our asset quality. We keep pressing on doing the things the way we’ve always done things. Our borrowers have a lot of skin in the game, and we engage in risk-averse lending.”
He said the pipeline of RESG loans is in good shape into the first half of 2021. Business tied to the Atlanta office and the Southeastern region is leading the rebound after the COVID-induced slowdown.
“Coming out of COVID, the pool of opportunities shrunk, but competition pulled back some,” Hamblen said.
“New York is certainly probably our most challenged market in the sense that it was hit early and hardest probably of any market in the country by COVID-19, and the response, whether you agree with it or not, was a very vigorous response to really shut down the city,” Gleason said during an Oct. 23 earnings call.
And that is going to cause New York to be slower to rebound than cities that were less aggressive about sheltering in place and shutting down economic activity, he said.
Projects in the Big Apple may have slowed down, but the New York office is keeping busy with opportunities in Boston and Cambridge, Massachusetts; Baltimore; Washington, D.C.; and Philadelphia.
Nine RESG loans totaling $309 million remain in a first or second deferral to start the fourth quarter. Ongoing deferrals through Bank OZK’s community bank network totaled $185 million on 208 loans, down from $669 million on 1,448 loans.
Overall, Bank OZK’s pandemic-inspired loan deferrals fell from a high of 6.9% in July to 2.8% as of Sept. 30.
During the first and second quarters, the bank’s disaster relief program provided short-term payment deferrals on 3,461 loans totaling more than $1.3 billion. That tally fell to 583 loans totaling $550 million at the end of the third quarter.
Rounding out Bank OZK’s active loan deferrals are 140 purchased loans totaling $35 million, down from 866 loans totaling $109 million, and 226 indirect marine and RV loans totaling $22 million, down from 1,157 loans totaling $126 million.
“We’ve not done CARES Act extensions where we thought they would not be successful in helping the customer work through what truly was a short-term situation,” Gleason said during the Oct. 23 earnings call. “And we tried to not grant them excessively to people who had not been impacted.
“Now the truth of the matter is, probably the vast majority of them that we granted were to people who would have paid even had we not granted it and would not have become past due or problematic. But they were impacted probably not to the point of defaulting but impacted by the pandemic.”
Conway’s Home BancShares Inc. recorded a significant reduction in its portfolio of deferred loans during the third quarter as well.
“The Sept. 30 deferral number is down by 70% from the June deferral number of $3.18 billion,” Kevin Hester, chief lending officer at Centennial Bank’s parent company, said during the company’s Oct. 15 earnings call. “This decrease is even better than was anticipated when we spoke 90 days ago.”
Hester is encouraged that most of the remaining borrowers in deferral are positioned financially to make a go of it, with the possibility of loan adjustments waiting in the wings.
“We’re taking that and looking at projections for the next year, two years, trying to make sure that they can make it through this with the reserves they have left,” he said during the earnings call. “And for the vast majority of those so far, we’re seeing that work out for us, and we’re ready to move forward on a longer-term modification if it’s needed.”
Centennial Bank, with assets of $16.8-billion, carried deferments on 330 loans totaling about $930 million as of Sept. 30.
“Within that number are loans totaling $347 million that are only deferring principal, so they are currently paying their interest,” Hester said. “This leaves about $583 million in loans that are on full principal and interest deferments, which is about 5% of the loan portfolio.”
Geographically, the Arkansas region makes up 51% of the deferment balance followed by Florida at 39%, Hester said.
He added the biggest concentration is in hospitality, with about half of the deferred balances. Deferred hotel loans total about $475 million, with about 30% on principal-only deferment.